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Reprinted  from  The  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  Philadelphia,  July,  1915. 

Publication  No.  900. 

COOPERATION  IN  EXPORT  TRADE 
By  William  S.  Kies, 

Of  the  National  City  Bank  of  New  York. 

Organized  effort  in  any  line  generally  succeeds  over  individual 
endeavor.  Particularly  is  this  true  in  the  contest  between  nations 
for  commercial  supremacy.  In  highly  competitive  markets  success 
is  attained  by  the  country  whose  forces  of  production  are  most 
efficiently  organized,  whose  financial  resources  are  capable  of  the 
quickest  mobilization,  and  whose  sales  campaigns  reflect  intelligent 
collective  effort. 

The  best  example  of  national  achievement  resulting  from  intelli- 
gent coordination  of  efforts  is  that  of  Germany.  Twenty-five  years 
ago  Germany  set  for  herself  the  task  of  building  up  her  foreign  trade. 
Her  economists  saw  clearly  that  national  wealth  and  prosperity 
were  the  sure  rewards  of  a successful  foreign  commerce;  that  selling 
to  other  nations,  in  return  for  their  raw  materials,  the  products  of 
factory  and  workshop,  meant  a permanent  income  to  Germany  from 
the  labor  and  skill  of  her  citizens,  and  that  the  value  added  by  the 
processes  of  manufacture  gave  to  her  either  a call  upon  the  gold 
supply  of  the  world  or  the  option  of  a credit  which  could  be  used  in 
the  purchase  of  foodstuffs  or  other  raw  materials.  Germany  went 
about  the  matter  in  a thoroughly  scientific  manner.  An  intensive 
investigation  of  the  possibilities  of  the  various  markets  of  the  world 
was  begun.  The  characteristics,  customs,  manners  and  wants  of 
her  future  customers  were  carefully  studied  in  an  endeavor  to  as- 
certain what  goods  were  desired  and  those  for  which  a demand  could 
be  created.  There  was  to  be  no  attempt  to  force  upon  people  what 
they  did  not  want. 

Cooperative  societies  were  organized  for  the  advancement  of 
export  trade.  Chambers  of  commerce,  which  were  active  bodies 
and  not  paper  organizations,  collected  data  and  information  for 
the  benefit  of  all  interested. 

The  government,  keenly  alive  to  the  fact  that  commercial 
supremacy  means  national  power  and  greatness,  shaped  its  export 
policies  along  broad  and  constructive  lines.  Export  trade  needed 


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The  Annals  of  the  American  Academy 


encouragement;  consequently  drawbacks  and  export  bounties  were 
provided.  The  merchant  marine  needed  to  be  built  up;  subsidies 
were  voted.  Manufacturing  towns  distant  from  the  ports  were  at 
a disadvantage  in  the  matter  of  railroad  rates;  the  rates  were  forth- 
with adjusted  so  as  to  encourage  manufacturing  for  export.  For- 
eign trade  had  to  be  financed.  Branch  banks,  under  liberal  banking 
laws,  were  established  and  became  active  agencies  for  promoting 
trade  in  foreign  countries.  In  order  to  safeguard  the  domestic 
market,  a protective  tariff  was  instituted.  To  assist  the  German 
manufacturer  to  compete  with  others  efficiency  methods  became  the 
subject  of  careful  study,  and  when  it  was  demonstrated  that  com- 
bination meant  lessened  waste,  greater  concentration  of  effort, 
and  more  effective  production,  combination  was  encouraged. 
Price  agreements,  to  avoid  wasteful  competition  at  home  and  abroad, 
were  recognized  as  necessary  and  made  legal.  If,  in  order  to  meet 
the  competition  of  other  nations  in  foreign  markets,  it  was  necessary 
to  sell  below  the  price  prevailing  in  the  domestic  market,  a public 
opinion  was  created  which  applauded  such  a course  as  entirely 
patriotic,  in  that  the  greater  the  sale  of  German  products  abroad 
the  nearer  would  German  manufacturing  establishments  approach 
capacity  production,  and  capacity  production  was  early  realized  by 
German  efficiency  experts  as  the  best  means  of  reducing  economic 
waste  in  production  and  lowering  the  unit  cost  of  the  products. 

Germany  saw  that  successful  cultivation  of  foreign  markets 
must  be  based  upon  a thorough  knowledge  of  foreign  countries. 
She  planned  an  educational  system  for  her  youth  whereby  they 
were  taught  commercial  geography,  the  business  languages,  and 
the  financial  customs  and  manners  of  different  peoples,  and  her 
young  men  were  encouraged  to  go  into  different  parts  of  the  world 
as  commercial  missionaries  to  convert  the  consumer  into  a user  of 
German  goods. 

The  United  States  has  been  given  by  nature  all  of  the  resources 
necessary  to  build  a great  manufacturing  nation.  We  have  iron, 
timber  and  other  building  materials  with  which  to  construct  fac- 
tories and  workshops.  We  have  water  power  and  coal  in  abund- 
ance. We  raise  in  this  country  vast  quantities  of  raw  materials. 
Not  only  do  we  supply  our  own  manufacturing  establishments, 
but  each  year  we  export  millions  of  dollars  worth  of  such  raw  ma- 
terials to  other  countries,  and  we  have  the  power  to  increase  indefi- 


Cooperation  in  Export  Trade 


3 


nitely  such  production.  With  these  advantages  in  our  favor,  the 
United  States  should  become  the  greatest  manufacturing  nation  of 
all  times. 

We  have  made  great  progress  in  recent  years,  and  the  percentage 
of  increase  in  the  export  of  manufactured  articles  was  greater  in 
the  period  of  1900  to  1912  than  that  of  Great  Britain  or  Germany, 
but  if  the  figures  for  oil,  steel  products,  refined  copper  and  agricul- 
tural machinery  be  deducted,  the  remaining  totals  would  not  be 
encouraging. 

A study  of  our  export  figures  indicates  that  the  greatest  progress 
in  the  development  of  foreign  fields  has  been  made  by  reason  of  an 
intensive  study  of  markets  and  an  intelligent  organization  of  sales 
forces  on  the  part  of  great  industrial  corporations  like  The  United 
States  Steel  Corporation,  The  International  Harvester  Company, 
The  Standard  Oil  Company,  and  the  selling  companies  representing 
the  refined  copper  interests.  What  has  been  done  in  Germany  on 
a national  scale,  through  the  cooperative  efforts  of  all  classes,  with 
the  encouragement  of  the  government,  has  been  accomplished  by 
these  large  American  corporations  without  government  encourage- 
ment, and  entirely  as  a result  of  the  skill  and  ingenuity  of  the 
American  sales  manager  with  a large  vision  and  a constructive 
imagination. 

In  the  last  few  years,  however,  public  opinion,  if  it  has  been 
correctly  reflected  in  recent  governmental  action  and  in  legislation, 
has  decreed  that  large  combinations  of  industrial  units  shall  no 
longer  exist,  and  that  production  shall  be  carried  on  by  smaller 
units,  actively  competing  with  each  other,  irrespective  of  the  eco- 
nomic waste  resulting  from  competitive  methods,  the  duplication  of 
sales  organizations,  advertising  and  promotional  expenses,  and 
overhead  costs  in  general. 

We  are  in  the  midst  of  this  period  of  disorganization  of  the 
forces  of  industry  at  the  exact  moment  when  there  is  presented  to 
this  nation  an  opportunity  which  will  probably  never  again  come  in 
its  history — an  opportunity  for  introducing  American  goods  in 
markets  hitherto  closed  to  this  country.  Admittedly,  the  tre- 
mendous power  developed  by  great  combinations  of  capital  has  been 
in  numerous  instances  abused,  and  the  economic  value  to  the  nation 
of  highly  organized  instrumentalities  of  production  has  been  lost 
sight  of  in  the  popular  indignation  aroused  as  a result  of  the  exposure 


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of  abuse  of  power,  and  the  injury  done  by  unfair  practices  to  com- 
petitors. But  we  are  too  often  extremists.  Our  tariff  is  either 
unreasonably  high  or  ruinously  low.  We  stubbornly  refuse  to 
adjust  it  scientifically  through  the  agency  of  a board  of  experts. 
We  permit  our  railroads  and  public  service  corporations  a free  rein, 
and  when  the  abuses  which  such  a policy  fosters  are  brought  home, 
we  proceed  to  hamper  their  usefulness  and  to  block  their  growth 
and  development  by  the  passage  of  unscientific  restrictive  laws,  and 
by  over-regulation  on  the  part  of  many  state  commissions.  Too 
often  we  seem  to  prefer  to  tear  up  by  the  roots  rather  than  to  use 
the  pruning  knife.  And  so  in  dealing  with  our  trust  problem  we 
have  refused  to  recognize  the  great  advantages  of  concentration  of 
effort  in  production,  and  the  economies  which  come  with  efficient 
organization.  We  have  been  willing  to  sacrifice  all  this  rather  than 
to  attempt,  by  intelligent,  constructive  legislation,  to  preserve  that 
which  is  economically  sound. 

The  Sherman  Act  forbids  combinations  in  restraint  of  trade, 
or  which  would  tend  to  restrict  competition  in  foreign  and  domestic 
commerce.  The  recently  enacted  anti-trust  acts  do  not  change  the 
terms  of  the  Sherman  Act,  but  have  provided  a Federal  Trade 
Commission  with  very  large  inquisitorial  powers,  which,  while  not 
endowed  with  the  functions  of  a court  of  last  resort,  nevertheless 
will  have  a large  influence  in  determining  the  boundaries  within 
which  cooperative  effort  may  safely  be  carried  on. 

The  Commission,  since  its  organization,  has  shown  a keen  in- 
terest in  the  subject  of  foreign  trade,  and,  judging  from  the  char- 
acter of  its  membership,  may  be  expected  to  do  all  within  its  power 
toward  aiding  in  the  development  of  constructive  plans  for  building 
up  our  foreign  commerce. 

It  is  plain,  from  the  experience  of  Germany  and  England,  that 
material  progress  in  the  development  of  foreign  commerce  depends 
upon  cooperative  effort,  not  only  between  manufacturers,  but  be- 
tween the  government  and  those  interested  in  foreign  trade.  Within 
the  limits  of  the  trust  laws,  the  government  has  shown  a most  lauda- 
ble cooperative  spirit.  The  Department  of  Commerce  is  doing 
splendid  work,  and  the  present  chief  of  the  Bureau  of  Foreign  and 
Domestic  Commerce  has  built  up  an  organization  of  experts  who  are 
giving  real  service  to  our  manufacturers.  The  Treasury  Department 
has  applied  itself  to  the  study  of  the  financial  needs  of  the  South 


Cooperation  in  Export  Trade 


? 


? 


American  countries,  with  the  desire  of  being  helpful,  and 
along  constructive  lines. 

There  does  not,  however,  seem  to  be  that  spirit  of  cooperation 
among  manufacturers  themselves  which  is  necessary  to  the  accom- 
plishment of  permanent  results.  This,  to  a large  degree,  no  doubt, 
is  due  to  the  feeling  of  uncertainty  existing  in  the  minds  of  manu- 
facturers as  to  the  extent  of  the  application  of  the  Sherman  Act  to 
combinations  engaged  in  foreign  commerce.  Some  lawyers  have 
held  that  the  Sherman  Act  does  not  apply  in  foreign  commerce; 
others  have  held  that  it  does.  While  the  process  of  unscrambling 
combinations  is  still  going  on,  and  so  long  as  there  is  any  doubt 
about  their  validity,  there  will  be  hesitancy  about  forming  new 
combinations  irrespective  of  their  economic  value. 

A great  deal  has  been  said  recently  about  the  necessity  of  or- 
ganizing combinations  among  industries  interested  in  foreign  trade 
if  new  foreign  markets  are  to  be  successfully  developed.  There 
seems  to  be  quite  a general  agreement  that  the  Sherman  Act  should 
not  apply  to  combinations  organized  for  export  trade.  That  the 
Administration  itself  recognizes  the  necessity  for  cooperative  effort 
in  opening  new  markets  is  indicated  by  the  speech  of  the  President 
of  the  United  States  before  the  Third  Annual  Meeting  of  the  Cham- 
ber of  Commerce  of  the  United  States,  on  February  3,  1915,  when 
he  said: 


. ' ' * a 
is  working'  Jq-j . 


I want  to  know  how  cooperative  methods  can  be  conducted  for  the  benefit 
of  everybody  who  wants  to  use  them,  and  I say  frankly  that  if  I can  be  shown  that, 
I am  for  them.  If  I cannot  be  shown  that,  I am  against  them.  I hasten  to  add 
that  I hopefully  expect  that  I can  be  shown  that. 

Congress  will  not  meet  again  until  next  winter,  and,  therefore, 
legislation  clarifying  the  situation  by  amending  the  Sherman  Act 
so  that  it  shall  not  apply  to  combinations  in  foreign  trade  cannot 
be  expected  for  at  least  a year.  In  the  meantime,  opportunity, 
kept  waiting  at  the  closed  door,  may  turn  on  its  heels. 

It  would  seem  of  vital  importance  that  the  best  thought  and 
study  of  those  who  are  interested  in  the  development  of  our  foreign 
commerce  should  at  this  time  be  directed  toward  the  finding  of 
some  temporary  expedient,  if  possible,  which  will  permit  manu- 
facturers in  certain  lines  to  combine  in  organizations  for  the  study 
and  development  of  new  markets. 

Opening  new  markets  abroad  costs  money.  Wasteful  competi- 


T 


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tion  in  such  markets  injures  the  American  manufacturer,  serves  to 
discourage  effort,  and  benefits  only  the  foreign  consumer  and  the 
foreign  competitor.  In  its  last  analysis,  unprofitable  foreign  trade 
is  a burden  upon  the  industry  at  home,  whereas  profitable  export 
business  results  in  a prosperity  for  the  particular  industry,  in  which 
capital  and  labor  share,  and  which  ultimately  benefits  the  domestic 
consumer. 

There  are  no  restrictions  in  the  Sherman  Act  against  combina- 
tion for  the  purpose  of  studying  foreign  markets,  collecting  and  dis- 
seminating information,  investigating  efficiency  methods  in  produc- 
tion, or  against  promoting  in  general  the  interests  of  the  American 
manufacturer.  Combinations  under  the  Sherman  Act  are  only 
illegal  if  they  restrain  or  tend  to  stifle  competition  among  the  manu- 
facturers of  this  country,  whether  the  competition  be  in  foreign  or 
domestic  business.  Combinations  for  the  doing  of  export  business, 
which  would  result  in  the  shutting  out  of  other  concerns  from  the 
foreign  field  as  the  result  of  a monopolistic  scheme  of  organization, 
would  probably  be  illegal  under  the  Sherman  Act  as  at  present  con- 
strued. And  yet  export  trade,  with  its  many  difficulties  and  prob- 
lems, requires  such  a concentration  of  resources  and  effort  that  the 
great  benefits  to  be  derived  by  the  whole  country  from  a large 
foreign  commerce  argue  powerfully  for  the  removal  of  all  restrictions 
upon  combinations  in  export  trade. 

Without  wanting  to  be  understood  as  favoring,  under  any 
circumstances,  the  retention  of  the  provisions  of  the  Sherman  Act 
which  so  seriously  handicap  the  development  of  export  business, 
but  realizing  that  while  waiting  for  congressional  action  the  manu- 
facturers of  this  country  are  losing  precious  time  in  which  should 
be  begun  preliminary  foundation  work  of  greatest  importance  in 
the  upbuilding  of  our  foreign  business,  I desire  to  suggest  in  brief 
outline,  for  your  consideration,  a concrete  plan  for  the  organization 
of  export  societies,  which,  in  its  essentials,  would  appear  not  to 
violate  the  prohibitions  of  the  Sherman  Act,  when  interpreted 
according  to  the  “Rule  of  Reason.” 

Let  there  be  organized  under  the  laws  of  one  of  the  states  a 
corporation  to  be  known,  for  example,  as  The  American  Drug  Manu- 
facturers Export  Corporation,  The  American  Coal  Producers  Ex- 
port Association,  or  some  similar  title;  the  organization  to  be  incor- 
porated with  sufficient  capital  stock  to  permit  all  of  the  members  of 


Cooperation  in  Export  Trade 


7 


the  industry  throughout  the  country,  or  in  certain  cases  those  in  a 
particular  locality,  who  so  desire,  to  become  members  upon  exactly 
the  same  terms.  Each  producer  desiring  membership  to  subscribe 
to  a definite  amount  of  stock,  his  subscription  being  payable  in 
equal  instalments  over  a term  of  years;  sufficient  stock  to  be  re- 
tained in  the  treasury  to  provide  for  those  who  might  subsequently 
desire  to  become  members  upon  equitable  terms  fair  to  the  original 
members,  each  member  to  own  exactly  the  same  amount  oh  stock. 

The  general  scheme  and  method  of  operation,  which  will  con- 
stitute the  contract  between  the  corporation  and  the  members,  as 
well  as  between  the  members  themselves,  will  properly  be  embodied 
in  the  articles  of  association,  and  will  be  along  the  following  lines: 

1.  The  corporation  is  to  be  impartially  organized  in  a manner 
fair  to  all  its  members,  and  the  management  selected  with  expert 
ability  as  the  sole  test. 

2.  Membership  on  the  board  of  directors  to  be  arranged  so 
that  in  due  course  of  time  every  member  shall  receive  representa- 
tion. To  avoid  possibility  of  unfair  treatment,  there  will  be  pro- 
vided a permanent  arbitration  committee,  to  be  selected  in  an 
impartial  manner,  and  to  be  made  up  of  persons  having  no  interest 
in  the  industry.  To  this  committee  shall  be  referred  any  questions 
in  dispute,  and  its  services  may  be  invoked  by  any  member. 

3.  Each  member  shall,  at  the  beginning  of  the  year,  report  to 
the  export  corporation  the  amount  of  its  product  available  for  export 
during  the  year,  the  conditions  of  delivery  and  of  acceptance  of 
orders,  and  the  price  at  which  it  is  willing  to  sell  in  a foreign  market. 
These  tenders  may  be  changed  from  time  to  time,  under  such 
conditions  as  may  be  thought  advisable,  and  special  quotations  of 
additional  quantities  may  be  named  whenever  desirable. 

4.  The  sales  force  of  the  corporation  will  undertake  the  disposal 
of  the  exportable  surplus  of  its  members  on  the  terms  and  condi- 
tions specified,  obtaining  the  best  price  possible,  making  use  of  the 
export  commission  houses,  the  local  representatives,  the  trained 
salesman  and  every  agency  of  value  in  building  up  foreign  trade. 
The  difference  between  the  price  quoted  and  the  price  obtained 
shall  belong  to  the  export  corporation  as  a profit,  and  upon  all  sales 
all  members  shall  pay  to  the  export  corporation  the  same  percentage 
as  a commission. 

5.  Whenever  a demand  shall  be  found  to  exist  in  a particular 


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market  for  a certain  quantity  of  goods  which  must  bre  sold  at  a lower 
price  than  quoted  by  any  of  the  members  in  order  to  meet  foreign 
competition,  all  members  shall  be  notified  of  the  possible  order,  and 
given  an  opportunity  to  meet  the  foreign  price.  Competitive  bids 
will  be  received,  and  the  lowest  bidder  is  to  receive  the  order;  or, 
if  there  are  a number  of  low  bidders,  the  order  is  to  be  divided. 

6.  All  profits,  after  deducting  all  expenses,  and  setting  aside 
such  a sum  as  shall  be  deemed  necessary  for  promotion,  advertising, 
establishment  of  permanent  quarters,  etc.,  shall  be  distributed 
equally  among  the  members. 

7.  The  export  corporation  shall  pro\ide  an  expert  who  shall 
collect  statistical  data  and  information  of  value  to  the  industry, 
which  shall  be  distributed  promptly,  and  under  the  same  conditions, 
and  in  the  same  manner,  to  all  members.  The  export  corporation 
shall  also  have  on  its  staff  an  efficiency  engineer,  who  shall  make 
intensive  study  of  methods  of  production  in  the  industry,  cost  of 
production,  competitive  margins,  and  the  productive  capacity  of 
various  plants.  His  services  shall  be  available  to  any  of  the  members 
for  the  purpose  of  giving  advice  as  to  the  development  of  greater 
efficiency  in  production,  diminishing  the  cost  of  production,  or 
increasing  the  output.  He  shall  also  give  to  all  members  technical 
advice  as  to  the  best  methods  of  meeting  peculiar  requirements  of 
foreign  markets. 

8.  The  export  corporation  may  also  act  as  a purchasing  agency 
for  raw  materials.  Being  able  to  purchase  in  large  quantities,  as  a 
representative  of  many  consumers  in  a given  line,  it  will  be  able  to 
buy  in  foreign  markets  at  the  lowest  prices.  All  members  will  be 
entitled  to  the  corporation's  services  in  this  respect  upon  the  same 
terms. 

It  is,  of  course,  not  necessary  to  limit  the  membership  in  such  an 
organization  to  particular  lines.  Groups  of  manufacturers  in  allied 
lines  could  profitably  unite  to  form  one  export  company  which  could 
conduct  a sales  campaign  for  all,  as,  for  example;  a drug  manufac- 
turers' export  corporation  might  well  include  manufacturers  of  toilet 
articles,  cosmetics,  perfumes  and  bathroom  accessories.  Manu- 
facturers of  cottons,  woolens  and  silks  might  combine  in  one  large 
textile  export  association. 

In  the  scheme  of  organization  outlined,  competition  is  unre- 
stricted among  all  the  members  of  the  corporation.  Each  member 


Cooperation  in  Export  Trade 


9 


fixes  the  price  at  which  it  will  sell  its  product,  and  in  effect  tenders  to 
the  export  corporation  the  disposal  of  a certain  product  at  a certain 
price.  If  the  price  is  too  high,  the  product  of  a particular  member 
remains  unsold.  When  special  opportunities  are  found  in  a partic- 
ular market,  all  members  are  given  a chance  to  bid  for  the  business. 
Fair  competition  without  favor  is  thus  guaranteed  to  each  of  the 
members.  The  member  with  small  resources  and  a minimum  out- 
put is  not  placed  at  a disadvantage  if  he  cannot  meet  the  prices  of 
the  more  powerful  members  of  the  group,  because  he  will  receive 
his  share  of  the  profits  of  the  corporation,  which  will  result,  in  a 
large  degree,  from  the  commission  which  each  member,  whose 
product  is  successfully  sold,  must  pay. 

The  corporation  cannot  be  said  to  restrain  the  trade  of  its 
members  or  those  who  are  not  members.  Its  benefits  are  open  to 
all  in  the  industry  on  the  same  basis.  Its  members  are  not  obliged 
to  sell  exclusively  to  or  through  the  corporation,  and  are  thus  free 
'to  develop  trade  for  special  brands,  if  they  can  do  so  better  than 
through  the  corporation.  The  prohibitions  of  the  Sherman  Act, 
in  regard  to  restraint  of  trade,  are  meant  for  the  benefit  of  the  Amer- 
ican consumer  and  the  American  manufacturer,  and  neither  the 
American  consumer  nor  manufacturer  can  be  injured  by  the  opera- 
tions of  the  corporation.  Competition  in  domestic  markets  is  not 
affected.  If  the  American  consumer  is  affected  at  all,  it  will  be 
beneficially,  because  through  the  disposition  of  a large  part  of  the 
output  on  the  foreign  field,  American  manufacturers  will  be  able 
to  approach  nearer  to  capacity  production,  thereby  bringing  down 
the  unit  cost  of  the  article  manufactured,  with  a possible  reduction 
in  price,  in  the  domestic  market. 

The  greatest  advantage  to  be  derived  from  such  an  organization 
is  the  concentration  of  the  resources  of  different  manufacturers  in 
the  building  of  a thoroughly  efficient,  highly  trained,  sales  organiza- 
tion, under  skilled  management,  devoting  all  its  energies  to  the 
development  of  foreign  markets. 

One  of  the  greatest  benefits  to  be  gained  from  a thorough  or- 
ganization of  our  export  activities  would  be  unity  of  thought  and 
action  in  dealing  with  some  of  the  large  problems  connected  with 
foreign  commerce. 

Experts  representing  various  industries,  working  in  conjunc- 
tion, could  accomplish  much  toward  simplifying  the  mechanical 


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details  of  export  trade.  Greater  uniformity  in  bills  of  lading,  ship- 
ping documents,  consular  practices  and  fees,  customs  house  regula- 
tions and  port  charges  might  be  brought  about  by  united  effort. 
Better  service  could  be  exacted  from  steamship  companies  and  with 
greater  knowledge  and  closer  attention  to  details  the  numerous 
delays,  exactions,  and  fines  in  foreign  customs  houses,  which  are 
so  exasperating  to  the  importer  and  exporter,  could,  to  a great 
extent,  be  avoided.  To  a body  of  experts  of  this  character  could  be 
intrusted  the  investigations,  if  not  the  preliminary  formulation  of 
commercial  treaties  of  the  United  States,  which  are  of  such  impor- 
tance in  the  development  of  reciprocal  trade  relations  with  foreign 
countries. 

The  idea  of  such  an  association  may  appear  utopian  to  some, 
but  practical  Germany  has  demonstrated  the  value  of  intensive 
organization  and  concentration  of  effort  in  foreign  commerce. 

The  above  plan  is  put  forth  not  as  a finished  scheme  of  organi- 
zation which  should  be  adopted  without  modification,  but  merely 
as  a suggestion  in  broad  outline,  in  the  hope  that  by  focusing  atten- 
tion upon  a concrete  proposition  some  definite  results  might  be 
accomplished.  If  the  scheme  of  such  a cooperative  export  corpora- 
tion or  society,  which  is  about  the  only  form  of  legal  combination 
possible  under  our  existing  laws,  should  prove  to  be  impractical  in 
its  application  to  present  conditions,  that  fact  in  itself  should  em- 
phasize the  immediate  necessity  of  unshackling  American  business 
so  as  to  permit  freedom  of  action  in  the  foreign  field.  On  the  other 
hand,  if  so  reasonable  a plan  for  cooperative  action  as  that  outlined 
be  considered,  in  its  fundamentals,  as  violating  the  provisions  of 
the  Sherman  Act,  then  the  absurdity  of  having  such  a law  upon  our 
statute  books  would  appear  to  be  clearly  demonstrated. 

Of  course,  it  must  be  recognized  that  cooperation  through  the 
means  of  some  legal  form  of  combination  is  not  essential  or  neces- 
sary to  the  development  of  foreign  business  in  all  lines,  although  in 
standardized  lines  where  foreign  competition  is  keen  our  manu- 
facturers must  have  the  right  of  organization  if  progress  is  to  be 
made. 

For  the  marketing  of  many  products,  the  present  export  or 
commission  house,  with  its  thoroughly  efficient  organization,  fur- 
nishes the  best  of  facilities  to  the  exporter,  although  even  here  an 
organization  among  various  manufacturers,  for  the  purpose  of  de- 


Cooperation  in  Export  Trade 


11 


veloping  a market  and  carrying  on  a general  publicity  and  sales 
campaign  for  the  benefit  of  all,  will  prove  valuable.  Such  a selling 
organization  might  arrange  with  the  commission  house  to  attend  to 
all  of  the  necessary  details  in  the  actual  exportation  of  the  goods. 

In  certain  particular  lines,  too,  where  a manufacturer  is  inter- 
ested in  developing  a market  for  a particular  brand  or  design,  there 
might  be  little  advantage  in  combination  with  a competitor,  except, 
perhaps,  that  there  should  be  a clearly  recognized  right  among  such 
competitors  to  make  binding  agreements  in  regard  to  the  extension 
of  terms  in  foreign  countries. 

As  indicating  the  necessity  of  our  manufacturers  being  permitted 
to  make  agreements  in  the  matter  of  the  extension  of  credits,  let 
me  quote  from  a letter  received  from  a large  manufacturer  a day  or 
so  ago.  He  says: 

Of  course,  our  principal  trouble  at  the  present  time  is  with  credits.  We  are 
limiting  our  dating  to  “90  days  from  date  of  invoice,”  and  we  have  heard  of  some 
competitors  who  have  given  120  days,  but  we  have  called  their  attention  to  the 
fact  that  if  the  various  American  manufacturers  are  going  to  sell  terms  in  com- 
petition with  one  another,  instead  of  merchandise,  we  shall  all  be  losers  in  the 
long  run,  because  the  buyer  in  Buenos  Aires  will  simply  play  one  concern  against 
the  other  to  secure  the  longest  dating. 

The  matter  of  credits,  due  to  the  difficulty  in  obtaining  credit 
information  concerning  firms  in  foreign  countries,  is  a serious  ob- 
stacle to  the  growth  of  export  business.  The  long  time  credit  which 
has  heretofore  been  customary  in  South  American  countries  and 
Russia  is  violative  of  sound  financial  principles.  A man  should 
receive  such  time  for  the  payment  of  his  bills  as  will  permit  him  to 
realize  upon  the  sale  of  goods.  When  he  has  received  the  money 
from  the  sale  of  the  goods,  a part  of  it  belongs  to  the  merchant  who 
sold  him  the  goods  and  the  rest  is  his  profit.  If  he  is  allowed  to 
keep  that  which  does  not  belong  to  him  for  a further  length  of  time, 
he  will  be  tempted  to  speculate  or  at  least  to  divert  the  money  into 
other  sources.  Too  long  credits  encourage  over-stocking,  over- 
extension  and  speculation.  If,  in  the  cultivation  of  new  markets, 
American  manufacturers,  in  order  to  get  business,  will  be  obliged 
to  compete  with  each  other  in  the  extension  of  lengthy  credits,  and 
will  be  denied  the  right  of  agreement  or  cooperation  in  matters  of 
this  kind,  the  results  in  the  long  run  are  bound  to  prove  disastrous. 

Injurious  competition  between  our  manufacturers  in  foreign 


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The  Annals  of  the  American  Academy 


markets  will  inevitably  result  in  making  the  business  for  all  unprof- 
itable, forcing  many  out  of  the  market  in  disgust,  to  the  entire 
satisfaction  of  our  foreign  competitors,  who  derive  profit  and  en- 
joyment from  our  attempts  to  destroy  one  another  in  internecine 
industrial  warfare. 

It  cannot  be  denied  that  in  the  scheme  for  an  export  corporation 
as  outlined,  there  are  opportunities  for  abuses  and  the  growth  of 
practices  which  may  be  injurious  to  some  of  the  members.  By  the 
appointment  of  a permanent  arbitration  committee,  one  of  whom 
might  very  properly  be  a member  of  the  Federal  Trade  Commission, 
any  member  who  felt  himself  discriminated  against,  or  unfairly 
treated,  could  obtain  redress.  The  Federal  Trade  Commission,  too, 
has  power  under  the  law  to  correct  such  abuses  upon  complaint. 

The  important  thing  is  to  find  some  plan  of  cooperative  effort,  which 
is  fundamentally  legal  and  at  the  same  time  practical;  some  plan 
which  can  be  availed  of  by  our  manufacturers  without  danger  of 
criminal  prosecution,  until  such  time  as  the  law  shall  have  been 
changed. 

The  smaller  manufacturer,  of  necessity,  has  become  interested 
in  the  subject  of  developing  export  trade.  In  many  instances  he 
cannot  afford  the  cost  of  a promotion  campaign  in  a foreign  market. 

The  very  prohibitions  of  the  Sherman  Act  which  are  designed  to  give 
him  an  equal  opportunity  operate  to  put  him  at  a disadvantage  with 
the  larger  manufacturer  capable  of  maintaining  an  effective  sales 
organization  in  foreign  lands. 

By  combining  the  resources  of  manufacturers  in  a given  line,  a 
highly  trained  and  efficient  organization  can  be  developed,  operat- 
ing at  a minimum  expense,  which  can  scientifically  study  the  markets 
of  the  world,  disseminate  information  for  the  benefit  of  all  and  con- 
duct comprehensive  sales  campaigns  along  educational  lines,  which 
will  be  sure  to  bring  favorable  results. 

The  possibilities  of  our  commercial  future  carry  a striking  ap- 
peal even  to  the  ordinary  imagination.  -Whether  the  great  oppor- 
tunity in  the  nation’s  history  will  be  taken  advantage  of  in  full 
measure,  to  the  lasting  benefit  of  the  whole  people,  will  depend  upon 
the  education  of  our  people  to  the  value  to  this  country  of  export 
trade;  upon  the  development  of  a genuine  spirit  of  cooperation 
among  our  manufacturers  in  the  intensive  study  of  the  possibilities  » 

of  new  markets;  upon  the  patience,  skill  and  tact  which  are  exercised 


4 


Cooperation  in  Export  Trade 


13 


in  the  cultivation  of  the  foreign  field;  upon  the  building  up  of  a 
public  opinion  which  will  compel  the  removal  of  the  fetters  from 
legitimate  business;  and,  of  most  importance,  upon  the  assumption 
of  leadership  in  this  movement  by  men  of  broad  vision,  untiring 
energy  and  unselfish  devotion. 


4 


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